Investors pulled £150m from the Investment Association UK Direct Property sector in November ahead of the M&G Property Portfolio’s suspension the following month, according to the latest flows figures from the industry body.
The M&G fund had a cash level of 4.8% at the end of November making it difficult for the fund to meet redemptions. It suspended on 2 December and despite raising £70.4m since suspension, with a further £67.4m in the pipeline, it still needs higher cash levels before it reopens.
AJ Bell personal finance analyst Laura Suter noted £1.8bn was pulled from direct UK property funds in the year to the end of November. “There are already reports of an increase in property fund withdrawals from investors after the M&G suspension, meaning this figure is likely to climb higher when December data is in.”
Targeted Absolute Return faces £7.5bn outflows
In total, savers invested £1.6bn in November 2019, the IA statistics showed. UK equities returned to net inflows for the first time since May 2019, while IA Volatility Managed was the best-selling sector for the first time taking in £411m.
In contrast, the Targeted Absolute Return sector again delivered the worst monthly net flows.
The sector faced £656m worth of redemptions in November, building on the £566m net outflows faced by the sector in the October IA figures.
Suter expected the trend to continue well into the 2020s. “Outflows since July 2018 now total almost £7.5bn – meaning that £1 for every £11 invested has been withdrawn during that period.”
Investors returned to UK equities for ‘Boris bounce’
While UK equity funds took in £108m in November, over the 12-month period they shed almost £3bn, noted Suter.
“Considering the FTSE 100 finished 2019 up more than 17% and the FTSE 250 rose 29% during the year, these investors may be regretting that move now, with the benefit of hindsight.”
But she noted they would have benefitted from the rebound in December as the Conservatives delivered a decisive win at the UK general election. The FTSE 100 rose 2.8% in December while the more domestic-focused FTSE 250 jumped 5.4% over the month, according to FE Fundinfo.
Willis Owen head of personal investing Adrian Lowcock expected the trend of investors returning to UK equities to continue in the IA figures for December thanks to increased political clarity after the 2019 election.
